Justin Liggit entered the investment industry more than 20 years ago as a financial advisor. In 2011, he took on a major project that ended up steering his career toward a more creative role, which allowed him to focus on marketing and investor relations and how the two can work together.
Today, he is the Director of Investor Relations for DJE Texas Management Group, a vertically integrated multifamily investment firm that focuses on large value-add syndication strategies. In this episode, Justin tells us about the target investor for DJE’s syndications, branching out into Texas ranch land, and why he values stillness when it comes to his investor relations role.
Justin Liggitt | Real Estate Background
- Director of Investor Relations of DJE Texas Management Group, a vertically integrated multifamily investment firm based in San Antonio, TX.
- Portfolio: GP of 2,000+ units
- Based in: San Antonio, TX
- Say hi to him at:
- Best Ever Book: How to Write One Song by Jeff Tweedy
- Greatest lesson: Be patient with yourself.
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TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed and I'm here with Justin Liggit. Justin is joining us from San Antonio, Texas. He's the director of Investor Relations at DJE Texas Management Group, a vertically-integrated multifamily investment firm based in San Antonio. DJE is general partner of over 2000 units. Justin, can you start us off with a little bit more about your background, and what you're currently focused on?
Justin Liggit: My background is a story of just being in the investment industry for about 20+, closer to 25 years actually... But I actually started in investment management side of the business, as a financial advisor. It was series [unintelligible 00:02:52.12] license all up to the gills, and was kind of going in the direction of sales and investment, sales team management, whenever there was kind of a real big inflection point in my career that allowed me to really kind of draw off of my technology, but more importantly, my creative background... Because I had every intention of going to New York someday and becoming a slightly famous artist at some point... But I ended up having a different direction. I went in during college, and that really kind of all came to fruition in 2011 on a very large project that kind of steered my career, still in the investment industry, but more towards marketing, working with creatives, and then really kind of starting to just dig deeper and deeper into the interplay between marketing and investor relations, and how those two things work together in order to help raise funds for private market real estate deals such as multifamily syndications, that DJE does.
We're actually now close to 5000 doors acquired as of earlier this year, whenever we closed some of our larger projects [unintelligible 00:03:47.16] namely being one of those... But we really focus on large value-add multifamily syndication strategies... So working with 506(b) investors, which allows us to work with non-accredited and accredited investors. And we're generally looking for things that are north of 150 units here in the San Antonio market. We've erred a little bit more towards Class B assets over the time since COVID started, but now we're really just looking for good projects that we can not only acquire, but also manage the back end of the project, because we did integrate our property management company at the beginning of COVID.
Slocomb Reed: You focus on investor relations, Justin... I'd love to ask you a boatload of questions about vertical integration, why did you bring property management in house... I want to make sure I'm asking you about your expertise. When it comes to acquisitions and day to day operations, how involved are you in that?
Justin Liggit: The acquisitions side of things - not a ton. That is really something that Devin plays really, really close to the vest... And I think a lot of that - it's not really something of a situation where he didn't feel like I would be able to add value to that side of it, but it's really a divide and conquer sort of mentality between the two of us.
Slocomb Reed: Sure.
Justin Liggit: He really tells me [unintelligible 00:04:59.18] kind of thing. So the acquisition side, not a ton. I'm not doing a ton of underwriting, and those sort of things, but I can pick apart a pro forma and those sorts of things whenever I'm in the fundraising process with investors. On top of that though, as far as the operational side of things, I do have exposure to those as it relates to servicing clients, any sort of relationships that we manage with centers of influences, self-directed IRA companies or trust companies, making sure that our distributions and our K-1's are being handled appropriately... Those sorts of things that are really, really critical to the investor experiences are things that I'm directly contributing to.
Slocomb Reed: Justin, how long have you been with DJE?
Justin Liggit: Just over two years. It's going on two and a half years now.
Slocomb Reed: Gotcha. So we're recording in early July of 2022... So you came in during COVID. Had DJE already decided to bring property management in-house?
Justin Liggit: Not to my knowledge.
Slocomb Reed: Okay. So you were there when that decision was made. It sounds like the entire portfolio is in San Antonio, and San Antonio is your only market?
Justin Liggit: As of right now, that's correct. Yes.
Slocomb Reed: Gotcha. So yeah, I can see where bringing property management in-house makes sense. I'm an owner-operator myself; my portfolio is significantly smaller, but I also self-manage for a plethora of reasons, Justin... Give us a quick idea of why DJE decided to take on the work of bringing property management in-house, and then we can move to some more investor relations related topics.
Justin Liggit: Absolutely. I think that at the highest level that I'd be able to speak to, it was an issue of control. And we were heading into a time where every day that passed, I think everybody kind of felt like we were losing more and more control over either what was real information, or information that we could act on. And there was a bit of kismet though to the entire thing; [unintelligible 00:06:45.28] and this gentleman Eli really kind of coming across each other's paths, and meeting each other... They had been in each other's worlds for a while, and they had a relationship, but I think that there was just a bit of Kismet in the timing of it. Me joining in February, and then Eli starting to build out his team in May... I think it really allowed us to really kind of buckle down and not only exert some control over our portfolio and our holdings during a time where people just felt like things were so uncontrollable.
And then from there, in hindsight, it seems absolutely crystal clear. How did we not do that sooner? Because the abilities and the resources and the information that we're able to act on now as a result of building out that team, and having confidence in our own data and our own people is just immense. And it stands to reason that so much of the solvency and the performance and the success of the project is the management section of it.
I'm involved for like the first five minutes of the project, so it stands to reason, it makes absolute sense how just during that time when things were really, really tough, and we had a little bit of luck, but also a lot of willful determination to get out there and make a change, and it really worked for us.
Slocomb Reed: Justin, hopefully you're involved in the last five minutes of the deal as well, when distributions happen...
Justin Liggit: Absolutely, yeah... [laughs]
Slocomb Reed: But also, the reason why you all didn't bring property management in sooner and why the vast majority of syndicators don't integrate is because it's hard. You're also talking about making the decision to build a team that's basically in the same industry, but it's a different component of real estate investing during one of the most acute labor markets in the history of the United States. It's not easy work, but man, I'm right there with you when it comes to the amount of control that it gives you. Within the variables, I often advise people to differentiate between their macros and their micros, recognizing that we don't have much control over what happens with inflation. We don't have much control over what happens with redevelopment in San Antonio in general. 5,000 doors is still a small fraction of all apartments in San Antonio... But doing your own property management or bringing property management in-house gives you very powerful control over your micros; you have the ability to figure out how long it takes to turn a unit, how long it takes to lease a unit. You're the one having the conversation about do you need to tweak your rent rates, do you need to tweak the way that you're marketing your apartments?
An example from my portfolio, Justin - because I self manage, I was able to recognize that I was trying to lease apartments in a building, and three quarters of the apartments were just flying off the shelf; they were appropriately listed, professional photography, appropriate list price for rent, but these few just weren't going, and then I realized it was because the sun never shines directly on them, and the bedrooms and the living rooms have no overhead light. And what we needed to do was just get lamps in those rooms, and plug those lamps into the outlets that have switches, so that we could demonstrate that the switch powers an outlet, but also so that we could have the room nice and bright and feeling large when a tenant came in. That's not something that a third-party property manager necessarily thinks of for you, and they definitely don't act on it as quickly as you can when you're the one who's in management.
That's a very micro example, but again, that's the point of bringing property management in-house, is that it gives you control of those micros. It gives you the ability to adapt to changing circumstances, to react to the data that you're able to collect because you're in management, and you can react faster... There are a lot of reasons. I'm very pro management, if you can't tell, Justin.
Justin Liggit: Yeah, I love it. I am too, because it helps me kind of sleep at night, kind of thing... Because it's like our brand is on the table. And to a large extent, I feel like my brand is on the table, because I'm kind of extending myself out there, liaising for the company, and raising funds. But at the same time, one of the things I really love the most about your comment was how just something really small or seemingly small, it can sometimes have a night and day difference on human behavior and experience.
So really, if you want to break it down to Pareto, it could be the 80/20 rule, whatever you want, that last 20% is sometimes the difference between winning and losing. Sometimes it's not. A lot of times it's not. Probably 80% of the time it's not. Sometimes that last 20% is worth digging into, kind of thing.
Slocomb Reed: Yeah. Late spring, early summer I handed over apartment showings to a new employee. And then I also implemented a change in the way that showings happened, that gave us more feedback... So my showing assistant, for lack of a better term, was asking for positive and negative feedback at the end of each showing, and then writing down what he could... And we have a meeting each week where we go through all of the feedback that we've gotten from those prospective tenants, so that on a week by week basis we can adapt to the changes that we're experiencing from the market.
You've got to have a hell of an asset manager to be getting that out of your property manager, if your property manager is third party. You might as well just bring property management in-house.
Justin Liggit: By the time you get the data, it might not be actionable anymore.
Slocomb Reed: Yeah, right. Justin, I mentioned earlier, it's early July 2022 that we're recording this... This episode will air sometime in August. I hope this conversation is still timely and [unintelligible 00:11:59.27] when this airs... But I want to know the temperature of the room when it comes to your investors and how they're feeling about getting invested, getting capital redeployed in multifamily right now. First, let me ask... You gave a list earlier in this conversation, but who is your target investor for DJE's syndications?
Justin Liggit: I would say our target investor is a high net worth individual private investor. Most of our fundraising and most of our investors have come from that cut. We haven't really gone the institutional route or anything like that in the past. I would say about 25% of each one of our projects is self-directed IRA or trust qualified money.
Slocomb Reed: Gotcha.
Justin Liggit: But overall, of those 5000 units acquired, right now we're working with around 600 active investors. And there's a pretty good, diversified mix of that between accredited investors and the non-accredited investors. And some of the projects that we've done in the past that were joint venture projects were dictated by that manager to be accredited, only 506(c) offerings. But our core projects, by and large, are 506(b) projects. All that being said, all of our investors - I don't know if it really is much of a difference between the individuals or the LLCs who are like kind of like a little investor group amongst themselves, or you know, your self-directed IRA, everybody is concerned about what's going on with interest rates and all of these sort of things. I think everybody kind of understands that it's becoming a pervasive thing that's making transacting business much more difficult.
We're kind of lucky in the sense that we have our fingers in some other types of shorter-term higher-yielding products that are nice. They're a nice complement to the multifamily stuff whenever we have both going, but right now, I think that since those sorts of projects are less reliant on interest rate swings, and financing, and things of that nature. We're really kind of looking at trying to bring some more of that to market right now. We're always looking and always looking at multifamily stuff, never stop looking, never stop offering, that kind of thing, but we are seeing things that you were talking about. Like you were talking about, the difference between macros and micros; we're seeing things that from a macro standpoint something looks great one day, the next day it could look completely night and day different. Just because of either it might be debt market stuff, it could be stuff that comes up about the asset, like PR kind of stuff that comes up while we're in the underwriting process, or something like that; or while we're starting to look at things. So it's not always explicitly related to the swings in debt stuff, but a lot of times tangentially related to it.
Break: [00:14:32.27] to [00:16:19.02]
Slocomb Reed: So the individual High Net Worth investors who invested in apartments syndications through the bull years of this market cycle - you know, that 2013 to 2020-2021, maybe into the very beginning of this year, the people who invested three, five and seven years ago, that invested in syndications that have recently sold, what I'm hearing is that those guys have a lot of cash sitting on the sidelines that's waiting for good deals, and some of them are having trouble finding the deals to deploy their capital in, and they're getting a lot more stringent when it comes to vetting operators, because they want to know what appears to be more tumultuous times economically, that they're going to be invested, that they have the right jockey on the horse. Is that the general sentiment that you're getting, that you have investors who have more capital than opportunities still, and that they're still eager to get invested for a decent return?
Justin Liggit: By and large, with the majority of the investors that we have, we've kind of I think cleared -- I think everybody's always having to maintain integrity, accountability, all of those sort of things...
Slocomb Reed: Of course.
Justin Liggit: ...but we've kind of built our reputation with a very large amount of our investor base. And I think that for them, they've checked that box for us, so they're just trying to see if we find a deal that passes our muster. For our newer investors - because we did take on a lot of new blood in the second half of last year, and also this year - I do anticipate, especially for the investors who have done more legwork as far as educating themselves on multifamily investing and things of that nature, I do expect a lot more due diligence, a lot more requests for extra kind of documentation, expanded proformas, stress tests; those sorts of things I think are things that we should just naturally assume we're going to be asked for more going into tougher times.
I had an investor just the other day that I met, and he was up in front of other passive investors presenting how he picks apart due diligence, and I got his laundry list of things that he wanted to see from us in order to just have a conversation. It's in lockstep with the kind of sentiment and experience that you're describing.
Slocomb Reed: Justin, let me ask this question in a way that I have yet to ask. Feel free to tell me that I'm out of bounds here... Looking at DJE's current deal flow, the stuff that you guys are taking to your investors currently, the stuff that you're currently underwriting, your expectations about how many LOIs you'll write, how many offers you'll get accepted, how many deals you'll bring to investors... Within your investor base, which sounds pretty solid, on a ratio of the total investment opportunity you're bringing to your investors in dollars and the capital your investors are looking to deploy, what would you say? Would you say that there's, for example, five times as much capital looking to be deployed as you have investable opportunity for? Is it really one to one? Do you have more opportunity than your investor base has capital for? Where would you say it comes in right now?
Justin Liggit: The only things I could give you on that is an anecdotal answer...
Slocomb Reed: Sure.
Justin Liggit: ...and that's a lot of people calling me to try and place money... And they're getting something similar to the speaking point that we're [unintelligible 00:19:36.22]. We're constantly looking, we're constantly trying to get a deal, but we're not going to get a bad deal. So that's about the most I could probably speak to. I've got a lot of people who are wanting to do deals, but the macros are making it tough in a lot of situations.
Justin Liggit: Macros are making it tough for you to bring opportunities to them, not making it tough for them to deploy.
Justin Liggit: Yeah, that are commensurate with what they have expected from us. And I feel like the bar that we've established is fairly high, and I'm happy about that, but we definitely just want to make sure that we're putting people in the right sort of deals.
Slocomb Reed: Yeah, of course. And it sounds like there's more capital than deals right now for you all by a long shot, which makes sense. I think that's what most people are experiencing right now. Justin, something I want to come back to that you were talking about earlier - you said that you're always analyzing and writing on multifamily, but that DJE is getting into other asset classes within commercial real estate investing. What are y'all branching out into right now?
Justin Liggit: In 2021, last year, I would say probably Q1, Q2, we started testing out a new product, that was backed by Texas ranchland; large tracts of Texas ranchland, 1,000-1,500 acres plus... And basically, the strategy is just splitting those parcels up using the resources and relationships that we have, and DJE being on the retail side of the deal - just splitting those parcels up, and it's 200-300 acres, 100 to 300 acres, it just varies from deal to deal... But essentially, investors are on the debt side of this transaction, and they get 11%, and total annualized return for a maximum 12 month hold period. And while we go through the business plan of splitting these up and selling them out.
So that was something that we tested out in some smaller ranch kind of stuff early in 2021, and there was a big appetite for it, especially once we kicked all the tires, and especially felt good about our rinse and repeat kind of process around it... Because it is kind of built out with the impetus of it being somewhat of a no bells, no whistles, kind of pure, high-yield income product.
So we've done that, and we did about 7 million in ranch deals last year, and we've done more than that this year, and I expect that we're probably going to do a bit more over goal, or more than we anticipated, simply because the multifamily stuff - it kind of feels like there's an element of spinning wheels in some situations. And with the ranch stuff, there's a lot of that red tape, and a lot of that underwriting, a lot of bureaucracy that we don't have to tiptoe through.
So I think that there might be an emphasis on doing a little bit more of that, while the barriers to entry aren't so high on that side of the business... And then we're also -- kind of on the back of that, building out that strategy, we're looking at another asset class that might be similar in experience and structure, but would be a different type of asset in the commercial real estate realm. But that's about as much as I can lead into that right now.
Slocomb Reed: Gotcha. Well, let's talk about those big 1,500-acre ranches. Correct me where I'm wrong, Justin - it sounds like you're buying larger tracts of land so that they can be subdivided into developable opportunities, and then selling them to developers, letting your investors carry the debt for DJE while you transact on both ends within 12 months. Is that correct?
Justin Liggit: Slightly. DJE could be in the deal longer; investors are in no more than 12 months. They're exited regardless of that sort of situation. It's not always developers; it could just be the next person in line that wanted to buy that tract of land. And the appetite, not only within our investor base, but also just in Texas, and with people wanting to buy ranch land in Texas, is a big part of what gave us the confidence to really push this product.
Slocomb Reed: Gotcha. Justin, if you guys are finding large tracts of ranch land to acquire and subdivide, and some of it is getting developed, why aren't you guys developing it yourself?
Justin Liggit: Not our game. [unintelligible 00:23:20.07] Multifamily is our focus, and this is something that came up as a result of just having really strong and close relationships not only here, but just in commercial real estate in Central Texas. And we were able to take that, and we could have taken probably this investment product and just really kept it for ourselves, and done it, ran with it ourselves. But instead, we opened it up to our investors, because we saw it as a real legitimate and great opportunity, and also just a nice, diversified kind of play for the long-term nature of multifamily. That's probably the same reason why we don't do class A development stuff here in multifamily as well. It's just, we are opportunistic, we're wanting to come in there and find value, and get in and get out kind of thing.
Slocomb Reed: Cool. Well, Justin, are you ready for the Best Ever lightning round?
Justin Liggit: Let's do it.
Slocomb Reed: What is the best ever book you've recently read?
Justin Liggit: There's a book that Jeff Tweedy, the lead singer of Wilco wrote, that I really enjoyed recently. It's about teaching everybody how to write a song a day, a song a week, kind of thing. And it's really not about songwriting. It's really about how to put a creative practice into your life, in a professional and personal mentality.
Slocomb Reed: Nice.
Justin Liggit: I come from a very, very heavy creative background. I was a painter and drawer most of my life until -- I graduated as a designer, but last-minute moved over to finance, and the rest is history. But I am a big, big advocate of creativity, and especially for people who are in analytical or business and kind of like numbers-related roles... The more sorts of people that you can find that can apply a creative mindset to the problems that you're trying to solve - you're always going to be better off having that sort of mindset [unintelligible 00:24:56.15]
Slocomb Reed: Justin, what's your best ever way to give back?
Justin Liggit: Volunteering. I used to work really extensively with a nonprofit in Dallas called Art Conspiracy, and now I've got lucky and one of our investors here at DJE got me connected to the San Antonio Lighthouse for the Blind and Visually Impaired. I'm going to be working with them on helping them to do some large immersive art experiences, it sounds like. So we'll see how it goes...
Slocomb Reed: That should be fun. Large, immersive art experiences for the blind.
Justin Liggit: [unintelligible 00:25:27.05]
Slocomb Reed: You enjoy creative challenges, right Justin?
Justin Liggit: You know, hopefully I'm not in a raise during that time period.
Slocomb Reed: Yeah. Justin, within commercial real estate investing, and probably within your work in investor relations, what is the biggest mistake you've made, and what is the best ever lesson that resulted from it?
Justin Liggit: Nine times out of ten stillness is the move. And you'll know when stillness is no longer the move, because you don't have any choice really, kind of situation. So I'm a big fan of letting things develop and evolve, especially whenever it's service-related issues... Or if you're waiting on a really important wire to get in so you can close, kind of thing, whatever it is... Not pushing, and not going outside of your brand and kind of outside of your skin and being a different type of professional than you are. Those are the kinds of things that whenever I did that, I wasn't being confident myself, or the fact that it was all going to happen or whatever, but now whenever I'm in those sort of situations, I take a step back, I meditate, I breathe, and I just kind of let it happen. And if you get to that point where you can't let it happen anymore, you have to do something, action is the move, then do it.
Slocomb Reed: Justin, what is your best ever advice?
Justin Liggit: It's one of two things. What me and my friends say to each other is "Make it enough. Whatever you do, just make it enough, man." Or two, my dad always used to tell me "Never let them see it coming." I think the context that he gave me that advice was probably not great advice, but I've parlayed it into more of like "Be a still waters kind of guy", you know...
Slocomb Reed: Sure, sure.
Justin Liggit: That's how I'm trying to take that advice.
Slocomb Reed: Often the advice our parents and grandparents give us needs to be thoroughly processed before being shared... And maybe needs to find new contexts. Totally. Last question, Justin... Where can people get in touch with you?
Slocomb Reed: You can get in touch with me at Justin [at] djetexas, or call me at 210-510-1275.
Slocomb Reed: Excellent. And links to your phone and your email are in the show notes. Justin, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show, leave us a five star review, and share this with a friend that you know we can add value to through this conversation with Justin. Thank you and have a best ever day!
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